Wednesday, February 8, 2023
HomeMarketBitcoin Prices Under Pressure as Cracks Spread Across Crypto Industry

Bitcoin Prices Under Pressure as Cracks Spread Across Crypto Industry

Bitcoin prices have plunged this year, taking their latest leg downward this month after crypto exchange FTX declared bankruptcy.

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Dan Kitwood/Getty Images

and other cryptocurrencies were edging higher Tuesday but the digital asset space continues to face pressure on multiple fronts, including contagion from the bankruptcy of exchange FTX and the increasing difficulty of crypto mining.

The price of Bitcoin has risen 1% over the past 24 hours to just shy of $16,500. The largest digital asset continues to hold above the two-year low near $15,500 it hit in the trough of panic selling amid the collapse of crypto exchange FTX earlier this month, but remains well below levels near $21,000 at which it began November. Bitcoin is trading for less than one-quarter of its all-time high from around this time last year.

“Bitcoin remains under pressure despite recovering slightly last week. Cryptos are still suffering the fallout from the FTX collapse and the still unknown full extent of the contagion,” said Craig Erlam, an analyst at broker Oanda. “While it’s seemingly trying to form a base around $15,500-$17,000, it may be easier said than done in this environment.”

The latest shoe to drop in the wake of FTX’s sudden and shocking bankruptcy is crypto lender BlockFi, which filed for bankruptcy protection in New Jersey on Monday. The group was one of the largest companies offering investors high yields for their crypto deposits, and floundered earlier this year amid a wider crypto market meltdown before it was extended a line of credit by FTX. BlockFi halted withdrawals earlier this month as FTX itself went bust, a precursor to its own collapse.

Meanwhile, unconnected to the ripples from FTX’s downfall, crypto miners are coming under increasing pressure from a deadly combination of low crypto prices, high energy prices, and rising difficulty to mine Bitcoin. Crypto miners underpin the decentralized network that supports Bitcoin, using computers to solve complex problems in a process that expends energy, secures the blockchain, and rewards them with tokens.

High energy prices and a collapse in the value of Bitcoin this year has put this business model under pressure, exacerbated by a rise in competition among crypto miners that has increased the amount of energy they are required to expend. Major crypto miners are in financial trouble, with Compute North going bankrupt in September and
Core Scientific
(ticker: CORZ) signaling that liquidity issues have it exploring alternatives, including possibly seeking bankruptcy protection.

“Currently, the Bitcoin Mining Difficulty Index is at an all-time high. As the mining competition continues to intensify and rewards are getting smaller, many miners are likely to fail to withstand current prices and go bankrupt,” analysts at crypto exchange Bitbank wrote in a report Monday.

Pinched miner balance sheets are likely adding to pressure on Bitcoin prices, with data from research group CryptoQuant showing an increase in the Miners’ Position Index. This “indicates an increase in the sale of Bitcoin by miners,” said the team at Bitfinex, and “could be one of the factors for Bitcon’s drop in price over the last week.”

Positions on Wall Street and among other traditional investors continue to signal widespread bets against any recovery in Bitcoin prices, with investors also exiting en masse holdings in listed crypto products. Investment products covering Bitcoin, Ether, and crypto equities saw continued outflows last week, according to digital asset manager CoinShares, with inflows increasing to products that bet against token prices.

Beyond Bitcoin on Tuesday,
—the second-largest crypto—gained 3% to $1,200. Smaller cryptos or altcoins were also higher, with
each rising 2%. Memecoins
Shiba Inu
rose 7% and 2%, respectively.

Write to Jack Denton at


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